OREANDA-NEWS. Because of this China and its demand still remains at the heart of the global resources industry. China once consumed 60 per cent of all seaborne iron ore, and despite its waning appetite it still has the largest influence on many metals due to its overwhelming demand for raw materials – relative to other nations. “If you believe that China is one of the most significant factors in the global mining market – whether it be capital, consumption, stockpiling, project construction or its announced infrastructure initiatives – then it’s imperative to pay attention to the economic and political issues shaping the country’s future,” australianmining.com.au reports in reference to Deloitte Canada’s global leader for mining M&A advisory, Jeremy South.

Unlike many other nations China has a highly interventionist government, which dictates market controls. “Beyond interfering with the free movement of markets, the government’s fiscal intervention may threaten its ability to fund new programs designed to spur future growth,” Deloitte reports.

In particular, the mining industry has been keeping a close on three primary initiatives: the Asia Infrastructure Investment Bank (AIIB), created to fund a range of commodity intensive energy, transport and infrastructure projects across Asia with a capital pool starting at what the Financial Times believes is US$100 billion; the One Belt, One Road program designed to spur trade between China and its neighbouring countries along the Silk Road; and the megacity project, which aims to link Beijing, Tianjin, and Hebei into a single city of 130 million people.

Despite these transparent plans, China’s trade regime remains opaque, with Deloitte stating that “without access to transparent official data, miners remain in the unfortunate position of making forecasts based on potentially flawed information”.

The 13th five year plan released in March has given some clarity on the nation’s direction.

Some small steps have been taken in the country to address glaring oversupply issues – which many majors are now addressing by focusing on lowering output guidance – by shutting underperforming or low quality operations.

An official at China’s human resources and social security ministry said the nation’s coal and steel industries expect to cut around 1.8 million workers as it seeks to reduce capacity, and address the growing stockpiles in the country.

The latest plan to slash the country’s coal and steel workforce came only days after Chinese coal companies pushed the government to set a price floor for coal to protect against bankruptcy and stem job cuts.

China also has also announced it will not approve any new coal mines for the next three years

The country plans to reduce around 500 million tonnes of coal production over the next three to five year, mainly by closing more than 5000 coal mines around the nation and relocating around one million workers, setting aside 30 billion yuan ($6.5 billion) to aid relocation of the workers.

These swift, if brutal, movements appear to already be paying dividends for the nation.

New data by Citigroup predicts the coal price may rise by 20 per cent on the back of these changes, as coal production falls around nine per cent, more than offsetting the predicted 3.4 per cent decline in demand.

In terms of iron ore, the rallies seen in the first half of 2016 have lifted the price out of the doldrums experienced in late 2015 to settle around the US$55 per tonne watermark, which provides a stronger foundation for continued growth in the market, although it does put the industry at risk of more marginal players returning to the sector and adding to the oversupply issue.

A national focus on copper intensive industries as part of its six strategic industries is also boosting the base metal’s future.

According to Wood Mackenzie, China’s plan to generate 15 per cent of its total GDP from industries such as IT hardware, energy storage and distribution, and new energy vehicles (which according to BHP Olympic Dam asset president Jacqui McGill uses three times as much copper as conventional vehicles) all bode well for copper.

This may drive reinvestment into its own coal and base metals industry later in the year, however most pundits believe China will focus its investment efforts outside its borders, spurred by long-term currency weakness driving them to invest in foreign assets before the yuan is further devalued and they lose purchasing power.